Knowledge base

What is a holding structure?

Holding structures have become an increasingly popular tool for individuals and organizations looking to effectively manage and protect their assets. These structures offer a range of benefits, including tax savings, risk mitigation, and the ability to leverage financing. Whether you are a seasoned investor or just starting out, having the right holding structure in place can help you optimize your financial outcomes and ensure that your assets are well-positioned for growth and success. With so many options to choose from, it is important to carefully consider your individual needs and goals when selecting a holding structure that works best for you.

About a holding structure

A holding structure is a business organization or legal entity used to own and control other companies or assets. The purpose of a holding structure is to provide central management and oversight while keeping the assets and operations of the underlying companies separate and protected.

What are the advantages of a holding structure?

There are several advantages of using a holding structure, which can help companies and individuals to manage risks, minimize taxes, and plan for the future.

Liability protection

One of the main benefits of a holding structure is that it provides liability protection to its owners. The liability and financial risk associated with being limited by separating ownership and management of different companies or assets of each entity is. This can help to protect the personal assets of the owners, as well as the assets of the underlying companies or assets.

Centralized control

A holding structure allows for centralized management and control of multiple companies or assets. This makes it easier for the owners or managers to coordinate and implement strategy across the different entities, and to make decisions about investments and other important matters.

Tax efficiency

In the Netherlands, corporate tax rates are 19% on profits up to EUR 200,000 and 25.8% on profits exceeding this amount as of 2024. Holding structures can leverage these rates alongside specific tax benefits. For example, some countries have lower tax rates for investment holding companies or allow for the deferral of taxes on capital gains. By carefully structuring their holdings, companies, and individuals can potentially minimize their tax liability and maximize their returns.

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Estate planning

A holding structure can also be useful for estate planning purposes. Dutch holding companies benefit from the participation exemption, which allows them to receive dividends and capital gains from subsidiaries tax-free, provided they hold at least 5% of the subsidiary and meet other specific conditions. This can help to ensure that the assets are managed and preserved in accordance with the owner’s wishes and that they are passed on to the next generation in a tax-efficient manner.

Asset protection

By separating ownership of different assets into separate legal entities, a holding structure can help to protect those assets from potential legal or financial claims. This can be especially important for assets at risk, such as real estate or intellectual property, or for companies operating in high-risk industries, such as technology or biotechnology.

In addition

In addition to these advantages, a holding structure can also help companies and individuals to secure financing, such as a mortgage, by allowing lenders to look at the assets and income of the underlying companies or assets, rather than just the holding structure itself. It is important to note that the specific benefits of a holding structure will depend on the jurisdiction and the individual circumstances. For example, tax laws and regulations are subject to change, and the tax benefits of a holding structure can vary depending on the country in which it is located. As a result, it is important to seek professional advice when setting up a holding structure, in order to ensure that it is structured in a manner that meets the specific needs and goals of the owners.

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Conclusion

In conclusion, a holding structure can provide several benefits to companies and individuals, including liability protection, centralized control, tax efficiency, estate planning, and asset protection. By carefully structuring their holdings, companies, and individuals can potentially minimize their risks, maximize their returns, and secure their assets for the future. Are you in search of more information about setting up a holding structure? Or would you like to incorporate your own BV? Schedule a free consultation with one of our advisors!

Published on 7 May 2024
Adam Cambridge linkedin
Adam is our English content writer and studies International Business Law at Leiden University

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